alanm

The simple IRA plan is not regarded as a successor plan for the 1 year wait; however, there is a rule you can't contribute to a 401k and a simple IRA plan in the same year. So to stop a 401k now means you can't do a simple until 1/1/05

IRC section 406 allows employees to be deemed employees of the US parent, but the companies must elect under section 2121(l) to provide US social security coverage for them. It is detailed in IRS form 2032

Not true. LIne 1 of the 1120s K-1 is for ordinary income from a trade or business. The instruction booklet says: if the income on line 1 is from active participation in the business, report the income on schedule E of the 1040. On schedule E is asks for designation if subject to self employment tax, and if so fill out Form SE. Turbo tax will do it all for you.

I assume by sanctions you mean penalties, which represent a fiduciary breach and should not be paid out of the plan. An aggressive stance would use the forfeiture account to pay penalties.

Out of the sub S, she would get a K-1 with her distribution(pay) placed on the form line designated as earned income subject to SE tax. From corproation C she can get a W2 or 1099 with the amount of pay designated earned income subject to SE tax. As long as she pays Fica taxes on the pay, no matter what form is used, it can be used as a basis for a contribution.

NO, as long as it was a decision made by the mutual fund company and not a plan fiduciary. However, I would add a like fund to the platform for others to have the same investment opportunity.

ok, as long as she actually works for B and C and has the W2s

No he can't. The two should be aggregated for the 41k limit, which includes the deferral in the SE plan. A change in structure doesn't change that.

Disregarding the cost issue. Yes, you can charge a penalty if, in the plan's investment policy, you deem that it is unsound to market time or frequently trade a retirement account, based on independent investment research: and there is plenty. You would be exercising your fiduciary authority as investment advisor to the plan. However, the question is: who gets the penalty if it is not a cost of trading? It would have to been spread to the participants or placed in forfeiture to pay some expense of the plan. Fidelity is putting in a 1% redemption charge effective the end of this year for investment in some of their funds for less than 30 days. The SEC is contemplating a mandatory 1% redemption penalty for any fund held under 5 days-there is a discussion of the proposal on their website. So, I see no problem with instituting a penalty program for frequent trading in retirement plans; however, the systems involved are difficult, such as the collection and utilization of the fee.

The IRS does not review each 1099 attached to the 945. As long as the totals match, you probably won't hear from them. If you failed to withhold and that participant does not pay their tax with the 1040 and they are audited and are unable to pay the tax, you will be held liable for the tax by the IRS. The 1099s are scanned in for the purpose of matching reportable income on the 1040 and for crediting withholdings to the tax payer.

There are several cases that define this situation and interpretation of 411(d)(3). One to look at would be Ninth Circuit court opinion Bayer, 769 F. Supp. 225, by District Judge Aver Cohn. Another is Flanagan, 3 F.3d, 1249. Another is Borda V. Hardy, March 5, 1998 No. 95-75493, Judge Nelson, circuit judge; Carr, district judge. The answer is there.

Disclosing all fees in the SPD is a requirement under title 29 CFR 2520.102-3(1) particularly if you want 404c protection; not to mention the new proposed regs coming from the SEC

That is probably ok, if you cap the asset fee at fair value of the TPA contract. In other words, the TPA is actually discounting their normal fee until assets reach a certain level. There is no rule saying a TPA can't charge an asset fee and that doesn't make the TPA an investment advisor.

The SEC rule 3040 and proposed rule 15-c2-2, deal with basis point advisory fees and mutual fund trailer commissions and their disclosure. You are required to be registered as an investment advisor to receive such fees. There is no rule saying a service provider other than a registered advisor cannot receive an asset fee from assets invested in mutual funds, however, the only way to prove it is not a commission for soliciting a plan or a finders fee is to tie the amount of the asset fee to a standard TPA fee arrangement. For example, if $50 a participant is a fair administration fee, then the amount of the asset fee collected should be the same. The problem is, as plan assets grow, the asset fee gets bigger while the standard TPA fee should decline. In that case, there is no way to justify the asset fee as a fee for service: it begins to look like a solicitors fee and the DOL and SEC would have a problem with that.

Sorry for the confusion. The two companies should be maintained as separate plans within the multiple employer plan trust to be tested individually. Don't transfer the data of one employer into the plan of the acquiring employer on the system. Continue to operate both plans as is prior to the buyout. After the transition period, directly transfer the census and balance information on the system, into the one surviving worksite plan. No physical transfer of assets occurs, just the participant demographic data and balances. A board resolution should be generated stating that you intend to operate the two plans as is under the transition rule and that on a date in the future the plan of the acquired employer will revoke participation in the multiple employer plan and all balances, in name only, will transfer with no distributions allowed.

I think you can use the Transition rule because they are regarded as two separate employers and two separate plans for testing in the multiple employer plan format. Do no merge the plans though, that brings up other issues; maintain them as is for the transition period and then merge them.

The multiple employer plan is a successor plan to Plan A. However, the worksite employer can change to current year testing with an amendment to the adoption to the mulitple employer plan without affecting the other adopting employers.

I had the same thing happen. If the owner will return the money quickly, there is no problem. Otherwise your insurance policy requires that you notify the company of a possible claim within 30 or 60 days of discovering the error or else it won't pay when a formal claim is made. In the mean time, if the owner indicates he won't return the money, hire a lawyer to file suit and the court will make him give the money back. If you can't get him in court, file the claim and collect on the insurance and the insurance company will go after him. There is no immediate need to put money in the plan unless you find you can't get him to court because he skipped. So I think you have a three month window to see how the lawyer does before you file a formal claim. You should notify the affected participants of the error and the steps you are taking to get their money restored.

The answer is in Rev Proc. 2003-44

It would be a successor plan and the weighted average would come close to the correct %.

I think you have a problem. Investment advisory fees incurred by an individual are supposed to be an above the line item(2% floor) under misc. deduction in schedule A of the 1040. Only if they exceed 2% of adjusted gross income do you get to deduct them. this is the case where an individual is allowed to hire his own manager that is not selected by the trustee/sponsor of a plan and universally offered to all participants as part of the administration service. The plan may allow payment of the fees, but I think the participant may have to report it on Schedule A.

There are many cases concerning the affected employee thing and plan terminations. Borda v. Hardy, 1998, judge Carr. Flanagan v. Inland Empire, 9th cir. 1993. The one that I like the best is Bayer, 769 F. Supp. 225, Judge Cohn. The Bayer court held that it was rational for the plan administrator to conclude that the employees were not affected employees if: employment ended before the plan termination date(resolution adoption by the board) and there was no evidence employee terminations were linked to the plan's termination.

You can make it deductible by getting a lien in favor of the plan and having the lien recorded at the court house. Under IRC sec 163 it is deductible subject to being able to trace the loan as acquisition debt of a house. The payments to the plan would be tax deductible. However, you have costs to record the lien.

I think the answers, by the numbers, are as follows: 1. Yes, each employer who wants to participate must adopt. The PEO internal employees can be excluded if the PEO doesn't adopt. Section 413 says any employer in the group can sponsor a multiple employer plan, since the PEO is one of the group it can be the sponsor. 2. Don't convert and you avoid the testing issue. Sponsor a new multiple employer plan, then terminate the old single plan 12/31. Transfer clients in blocks month by month into the MEP to ensure a smooth transition. Otherwise it will be a mess. 3. Probably lost and should be tested as a multiple. 4. New COs would be better served by going into a new multiple plan that would be run concurrently with the single plan. Again, this would ensure a smooth transition. You can't really put them in the single and administrate them as multiple client before the conversion date. 5. There is no guidance for this situation. I think the practical procedure is to transfer them to the newly adopted plan from the spinoff any time before distributions occur.

Usually the mulitple employer plan is written to say the leaving of a client is a "discontinuance of participation" not considered a termination by the client. Discontinuance triggers 100% vesting but not the right to take distributions until the employee terminates at the client.